CIO Pay Tied to Overall Business Success
Our exclusive research reveals how much top-tier CIOs' compensation rises and falls with their companies' fortunes.
Thu, August 30, 2012
CIO — Wayne Shurts has accomplished a lot since he joined Supervalu as CIO in April 2010: He embedded his IT staff in business departments, handed out iPads with real-time data to 1,100 supermarket managers, and implemented a promotion analytics system critical to the grocery company's business-transformation plan.
For all that hard work, Shurts got paid $1.3 million in fiscal year 2011. It's a nice sum, but not as big as it could have been.
As one of Supervalu's five most highly paid executives, his compensation rises and falls not so much on his own performance but on whether the company hits certain financial metrics. Supervalu exceeded its goal for cash flow, but fell short on same-store sales and missed net profits entirely, losing $1.5 billion.
While some companies might have handed out some cash for hitting one goal, Supervalu didn't. Its board of directors stipulated that no one would get any performance-related cash payout unless the company reached an earnings per share of at least $1.85, the number the company had hit the year before. But Supervalu tanked in fiscal 2011, ending the year losing $7.13 per share, and executive officers received zero cash incentives.
CIOs in the tippy-top echelons of executive ranks realize that although they are expected to perform technology and strategy work like Olympic athletes of IT, they are not rewarded for that sweat alone. The CIO's individual contribution must mesh with those of his C-suite mates, because only together can they hope to achieve the business metrics the board puts before them--and, afterwards, take home the really big bucks.
But even with such alignment, the company may still blow financial targets, dragging down the CIO's compensation just like that of his colleagues. The pay packages of CIOs and other executives can fluctuate 40 percent year-to-year, according to our analysis of annual proxy statements filed recently with the Securities and Exchange Commission (SEC). CIOs can do everything right, but larger economic forces or fundamental company problems can still mean they watch potential pay slip away. Supervalu, for example, is "reviewing strategic options" to get itself out of financial trouble, then-CEO Craig Heckert said in July.
"You're among the top officers of the company and your fortunes are very strongly intertwined with theirs," says Rick Ericson, an executive compensation consultant at PricewaterhouseCoopers. "You are subjected to lots of risks that are outside of your control."
It used to be that CIOs were judged and rewarded solely on IT achievements: projects finished on time and on budget, compliance systems installed and working, key hires made. That's still how it is for many CIOs, whose companies view IT as a support function.